The ZSE has been through a lot and so have the investors in it. In the early months of the year, the exchange grew in leaps and bounds, and many were attracted to it. Every second tweet was someone showing how much they had gained or someone offering to teach people how to get invested. These soon became known affectionately as ZSE touts. So people flocked in droves; what happened next was Hollywood, Bollywood or Nollywood worthy. Thanks to regulatory influence the market buckled, then it tumbled, and then it crashed. What lessons can we learn from the ZSE’s movement in 2022?
Your horizon is important
I recall in an article about picking the right investment for you, I mentioned the horizon first and foremost. While this will be a reiteration, I’m sure it’s a worthy one because it plays a part in what the ZSE’s regulation-induced collapse meant to you as an investor. Investors with a long-term view were displeased about the ZSE, but none cursed the day they discovered the ZSE. Those with short-term horizons (anything under 12 months) were less gracious and shouted from the highest mountain for all to hear that they had been scammed. We have said many times that stock markets better suit long-term investors. This is your reminder.
You may have come across the term patient capital before. To put it in simple terms, patient capital is money that has no pending or immediate obligations to fulfil and is, therefore, free to be invested long-term. It’s not money you can “afford to lose”, but it is money whose returns you can patiently wait on. This goes hand in hand with horizon but is not the same thing. Evidently, those who placed money that had pending obligations on The ZSE got the practical version of the lesson.
All ZSE counters (save ZECO) were affected by the contractionary measures that affected the market. However, there are two essential things to note. Firstly, not all counters were affected equally. Secondly and perhaps more importantly, some have started to show recovery. This tells us that not all shares are created equal. However, there is still a tendency for investors to buy lower-priced counters. Some love to see the large numbers of shares they acquire or think they will pick the next big winner. Quality counters are the best buy. And since you’re paying, you may as well get yourself the best quality counters.
Markets are …markets
The ZSE’s crash is attributed to regulatory pressure. A slew of measures changed the landscape significantly. However, we don’t often hear that the ZSE’s rise was also due to regulatory influences. Policies in the economy made the ZSE the best place for short and long term investment of money. So we need to understand markets, mainly that they work in waves, cycles or runs. There is a time of growth and a time of shedding. Some of these tides are more predictable than others but spend some time understanding markets overall.
Principle over profit
Over the months, I’ve seen people come forward mentioning how they invested (I use the term loosely) US$500 or US$1000 in the ZSE and have lost a considerable chunk of it, thanks to the crash. In my tips for beginners and on multiple platforms, I have always said your first 100, 500 or 1000 dollars will not make you a stock market billionaire. The point is to learn. I understand that going in and losing is a tough lesson, but it is valuable. Investing is a long-term game; it is a life principle more than a personal finance activity. There is a lot to learn, and while getting rich is the goal, it is the understanding of principles that helps us to get rich. Unless you happen to understand investing completely and stock markets, your goal is to attain principle before profit.
As a proud ZSE tout, I must say the market crash has been a blessing. It has brought to light many things I and other touts have been trying to teach people over the years. It has also put things into perspective. I can safely say hundreds of people have contacted me with questions about investing on the ZSE. Even when the market rampaged, I spoke in a manner that cooled expectations. I encouraged patience, principle and prudence. Many touts did too. On that note, I would like to congratulate the nominees in this year’s Capital Markets Awards People’s Choice Advocacy Award.